China Carbon Market Weekly Update - 30 September 2024

Week at a Glance (September 23, 2024 – September 27, 2024)

• Activity in China's national Carbon Emissions Allowance (CEA) market surged during a week without significant direct carbon-emission-related news. The market registered a total weekly volume of 3.14 million tonnes, a year-to-date high for 2024. Open trades accounted for 35.9% of total volume, more than double their historic average of 17.4% and suggesting a broad participation of covered entities of all sizes. This enthusiasm in the CEA market was likely a spillover from a surge in China’s stock market during the week, where a stimulus package revealed by China’s central bank and securities regulator prompted mid-double-digit gains for the week in all three major stock exchanges in China.
• Prices were mixed but remained near all-time highs. Block trade prices retreated slightly to an average of 99.02 yuan per tonne for the week. On the other hand, open trade prices closed the week higher at 100.43 yuan ($14.32) per tonne, returning to over 100 yuan for the first time since the first week of May. The volume-weighted average price of all current week’s trades was 99.23 yuan ($14.16) per tonne, slightly lower than the previous week but still the second highest ever.
• Activity across the nine regional China Certified Emission Reductions (CCER) markets went in the opposite direction of the CEA market, continuing to cool from over 4 million tonnes two weeks before to only 51 thousand tonnes. Beijing led the markets with 96% of their combined volume.

Carbon Market Update (September 23, 2024 – September 27, 2024)

Activity in China's national Carbon Emissions Allowance (CEA) market surged during a week without direct carbon emission-related news. The market registered a total weekly volume of 3.14 million tonnes, a year-to-date high for 2024. Open trades broke the one million tonne mark while block trades passed two million tonnes, both for only the second time in 2024 and 5 months after their previous times. Open trades accounted for 35.9% of total volume, more than double their historic average of 17.4%, suggesting a broad participation of covered entities of all sizes. This enthusiasm in the CEA market was likely a spillover from a surge in China’s stock market during the week, where a stimulus package revealed by China’s central bank and securities regulator prompted mid-double-digit gains for the week in all three major stock exchanges in China. An academic study from early 2024 by Chinese researchers found that China's carbon market and stock market exhibited “significant, unbalanced, and extreme event-sensitive spillover effects.”

Among the weekly total volume, the 2019-2020 vintage saw 571 thousand tonnes, the 2021 vintage saw 1.3 thousand tonnes, and the 2022 vintage registered 2.57 million tonnes.

Prices were mixed but remained near all-time highs. After closing the previous week at a volume-weighted average of over 100 yuan ($14.27)[1] per tonne for the first time ever, block trade prices retreated slightly to an average of 99.02 yuan per tonne for the week. On the other hand, open trade prices closed the week higher at 100.43 yuan[2] ($14.32) per tonne, returning to over 100 yuan for the first time since the first week of May. The volume-weighted average price of all current week’s trades was 99.23 yuan ($14.16) per tonne, slightly lower than the previous week but still the second highest ever.

Activity across the nine regional China Certified Emission Reductions (CCER) markets went in the opposite direction of the CEA market, continuing to cool from over 4 million tonnes two weeks before to only 51 thousand tonnes. Beijing led the markets with 96% of their combined volume. Shanghai and Sichuan also saw some trading. Meaningful price information is available from Beijing, which traded at a slight discount to its CEA counterpart.

[1] 1 US$ = 7.0101 RMB, middle price, September 27, 2024, China State Administration of Foreign Exchange. The same exchange rate is used for all other values quoted in US dollars ($) in the newsletter.

[2] Starting with the 26 February 2024 issue, this newsletter calculates its own daily overall market closing price using the volume-weighted average of traded CEA vintages. This replaces the closing price reported by the Shanghai Environment and Energy Exchange (SEEE), which is an equal-weighted average of the closing prices of all three CEA vintages. The closing price reported by the SEEE does not reflect market reality due to the frequent and vast volume differences among the vintages on any given day. For the same reason, this newsletter also records the daily high and low prices of open market transactions using the highest and lowest prices of any of the three vintages that have trades on the day, instead of the equal-weighted averages of the highest and lowest prices of all three vintages as reported by the SEEE.

?Disclaimer:

This material has been prepared by MVGX Holdings Pte. Ltd. and/or its subsidiaries, branches, or affiliates (together, “MVGX”) for the exclusive use of the party to whom MVGX delivers this material (the “Recipient”). The information contained in this material has been obtained from publicly available sources and has not been independently verified by MVGX or any of its directors, officers, employees, agents, representatives or advisers or any other person.

MVGX and each of its directors, officers, employees, agents, representatives, or advisers are not in the business of providing, and do not provide legal, financial, or trading advice to any Recipient. No part of this material shall be construed as giving rise to any duty of care owed to, or advisory relationship with the Recipient or any third party. This material is prepared for informational purposes only, is general in nature and is not intended to and should not be relied upon by the Recipient as legal, financial, or trading advice. Any such Recipient is responsible for consulting its own independent advisor as to the legal, financial, and trading consequences associated with its transactions based on the Recipient’s particular circumstances. No part of this material constitutes a solicitation, recommendation, endorsement, or offer by MVGX to buy or sell any products, processes, or services on any of its exchange platforms.

Whilst the utmost care and effort has been taken in the preparation of this material, no representation, warranty or undertaking, expressed or implied, is or will be given by MVGX or its directors, officers, employees and/or agents as to or in relation to the accuracy, completeness, reliability, timeliness, or sufficiency of the information contained in this material or as to the reasonableness of any assumption contained therein, and to the maximum extent permitted by law and except in the case of fraud, MVGX and each of its directors, officers, employees and agents expressly disclaim any liability for any direct, special, indirect, inconsequential, incidental damages or any other loss of damages of any kind arising from the use of this material (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if MVGX has been advised of the possibility thereof.

This material could contain technical inaccuracies or typographical errors, and information can be changed, updated, and deleted without notice. In addition, MVGX assumes no obligation to update or to continue to post the information contained in this material. The Recipient assumes total responsibility and sole risk for its use of this material. This material should not be regarded by the Recipient as a substitute for the exercise of its own judgment and the Recipient is expected to rely on its own due diligence with respect to its use. MVGX specifically prohibits any unauthorised redistribution, copying, alteration, transmission, performance, display or other use of this material and accepts no liability whatsoever for the actions of third parties in this respect.